What Happened to Liberal Democracy?'

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1:43Carol Massar:Bloomberg Audio Studios. Podcasts, radio, news. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. All right, I'm just going to say it, Settle into a chair if you're in a car. I say this often when we've got somebody spectacular, and we do have somebody spectacular on, because this is going to be a conversation we have been talking about in the newsroom with our team. Everybody's been reading this book, highlighting different things, and so we're delighted to have a very special guest. I want to start, though, with a quote from his new book just out this week.

2:19Carol Massar:In the opening of it, the author, I will do the reveal in a moment. Community, self-government, economic security, and other concerns relevant to the working class are thus central to the kind of liberal democracy he is advocating. These notions capture the essence of what the famous English poet and Republican thinker John Milton had in mind when he wrote, They who are greatest are not elevated above their brethren, live soberly in their families, walk the streets as other men may be spoken to freely, familiarly, familiarly, sorry, friendly, without adoration. This is in the introduction, page 28 of a new book out.

2:55Carol Massar:It's entitled What Happened to Liberal Democracy, Remaking a Politics of Shared Prosperity. It's written by Daron Acemoglu, his economic science Nobel laureate. And he is also institute professor in the Department of Economics at the Massachusetts Institute of Technology. I could go on about his accolades. I have to say, I said this earlier, you're the first person that my daughter, who's now 23, studied economics. I've been doing this for years. When I mentioned that I was reading your book and talking, she was starstruck. And she said from freshman year, she has been reading your research, citing it, citations in all of the work she's doing.

3:35Carol Massar:And she said, can you please get his autograph? So we are delighted to have you with us. You've never said anything. Truly, I've never heard you say anything like that in the six years we've been doing this together. So this is big. With this introduction, I'll come every week. I apologize for kind of rushing and stumbling through, but I just, we are delighted. Thank you. So am I. You've sparked a conversation for us, which is, I think, part of it. But let's get to, why did you write this book? You write a lot. You do a lot of research. Why this book? Because I think liberal democracy is one of the greatest achievements we've had.

4:11from our ape beginnings and lives in very unequal circumstances, in very uncertain existence mired by violence. Today we live in very complex societies, open to ideas with lots of individual freedom. People participate in politics peacefully, reach compromise, sometimes consensus. And moreover, we get lots of things from the government, including our ability to express our voice. That is an amazing achievement. And we are, I think, at the cusp of losing it. Liberal democracy, which still, in my mind, is the best framework, definitely something we very much need for the future, is in crisis after decades and decades of actually serving us quite well.

4:57So we have to understand that crisis and we have to rebuild liberal democracy unless we want to risk losing it. We're going to talk about how you think we can rebuild it, but I want to just get some parameters set here and do some definitions. Because early on in your book, you talk about the definition of liberalism and how it means different things to different people depending on where you live. The European view versus the American view. Just straighten that out for us right now before we dive into this conversation. Yeah, thanks, Tim. And that's very important. Liberalism has had many meanings over the ages, and today it's a big tent.

5:32but at the core of it is a commitment to protect individual liberties, also protect the weaker members of society, and also a commitment to progress from which we all benefit. Those are the defining features of liberal ideas, and they have acted as a rallying cry for people to build a better society. and the way that I define it, liberal democracy is the institutionalization of these ideas. It's carrying them to the actual practice of our lives. And it's been brilliantly successful in the grand scheme of things. We've had decades of very rapid growth under liberal democracy for about four decades following World War II.

6:24Those were not just high growth periods, but they were periods in which inequality was remaining stable or sometimes even declining. Every demographic group, men, women, by race, different education groups, they saw their earnings grow very rapidly. And, you know, always political disagreements were very important, but generally peacefully. Today, if you look at the picture, it's very different. Shared prosperity doesn't work anymore. Inequality has increased a lot. But worse, in the United States, we've seen about half of the population without a college degree experience stagnant or declining wages for about four decades, while productivity increased, while people with college degrees, postgraduate degrees improved their living standards significantly.

7:17And when you ask Americans, they have such negative views of democratic institutions, their trust in Congress, in the Supreme Court, in the presidencies at an all-time low. The country's polarized. And very concerningly, all Americans, but especially the young, are much less willing to say that democracy is the best form of government and they're willing to experiment with different ideas.

7:44Carol Massar:Were we destined to come here? I think people point fingers at a particular president or political figure. But were we destined to be here? I wouldn't say we're destined to be here. But I would also not blame it on a particular president or particular set of choices that are U.S. specific. because you see very similar trends across many advanced nations and even in the emerging world. So there are some commonalities there. So that's very important to get the diagnosis right so that we know how to deal with it. You actually make the point early on, I mean, this is the way your book begins. And Carol and I were both struck by this because we hear a lot about Viktor Orban now and the figure that he is in Hungary.

8:32But you make the point that, look, this is somebody who in the late 80s, early 90s was a very different leader and represented something very different, not just for that country, but for Europe. Absolutely. Absolutely. And I think it is sort of telling of the arc of liberalism that he was the poster child for, you know, liberty, for building democratic institutions. and then he turned his back on all of these ideas. You know, the exact circumstances in Hungary, of course, are different. Post-transition societies had a lot of trouble. Many of them navigated them better than Hungary. But I think the issues that we see in the United States have commonalities with Hungary, but they have a lot of commonalities with what's going on in the UK, in France, in Germany, in the rest of Europe.

9:25Is there anywhere where this is not happening right now that you would hold up in 2026 as an ideal liberal democracy? Ideal, absolutely not. And I don't think if you ask me what is an ideal liberal democracy going back, no, there isn't. Liberalism is always an aspiring ideology. And liberal democracy is always a work in progress. But today, you see different degrees of crisis. And one place where I would say the crisis is also showing up in some ways, but in a less severe form, is Switzerland. And one of the things about Switzerland is that it's much more participatory. And you also see even today in this polarized world that we live in, where people shout at each other, social media has really created a very toxic ecosystem of exchange.

10:14change, you have recently experienced an amazing achievement in Ireland in the context of the decision on the referendum, which was based on citizens' assemblies, building consensus, changing people's minds, debating it for a long time, and then putting it to vote for the people, where people actually said, this is what we want in two different referendums. So there are ways in which we can make this work even today, but there is a challenge.

10:43Carol Massar:There are challenges. And Tim and I both listened to some different podcasts. There's one you did with, I think, James Sanger of Harvard that was really, I said, what was wonderful is it was a dialogue, which is so refreshing. We talk about just even in our world that people don't debate anymore. It's one view comes on. And when I started doing journalism, you couldn't present one voice without having the other voice, especially on a topic. And it's interesting to see how things have changed. The sense of community, though, how important that is. And, you know, I think it might have been with Mr.

11:20Carol Massar:Sanger, this concept of people or maybe living different worlds, completely separate worlds. Absolutely. And that's a problem. It's a big problem. But let's go back to community, because thank you for bringing it up, Carol, community was quite important for liberal aspirations going back several hundred years. And when you look at early liberal democracy, communities played a very important role. One of the very bedrock ideas of liberal democracy is that there should be self-government. People, it's not just that you should be free to have thoughts, that you should also be free to put them into practice.

12:03That means that to have some control over your life. And it's not enough or it's not even meaningful to say, oh, you can achieve that by going to the polls once every four years or five years and have a vote. No, that starts with local associations, what the Tocqueville saw in the United States more than 200 years, 150 years ago, and he thought that was just so remarkable. It starts with local governments where people participate. It starts with other organizations like labor unions that were a very important way for many working people to participate in self-government. And all of these, you see, they start at the community level.

12:40But there's one thing, something else, and then you actually put your finger on that, Carol, which is that when we have a debate, I think the best way of ensuring that we're not just talking past each other or we're not shouting at each other is that we have some shared values, shared moral understanding, shared principles. And that, again, comes from communities, and then emanates from communities to the national level. So all of these are very important. But liberal democracy over the last several decades has also turned its back on communities. Communities have become more segregated. There has been a deeper division in the United States between, say, not just Republican and Democrat, but between more educated and less educated segments.

13:26Their values have diverged. Their networks have diverged. And everything that was a bit of like a melting pot is no longer like one very important one that we actually often overlook is where people work. The sort of, of course, I'm exaggerating, but the typical firm of the industrial age was like a manufacturing plant where you had managers, you had consultants, you had engineers, You had white-collar workers, blue-collar workers, custodial workers. So it was a real melting pot. Today, the image that you might have in your mind is Google on the one hand and McDonald's on the other. And it's a complete divide in terms of not just income, education and background and who works there.

14:10And so we're not getting that melting that will bring those shared principles together on which we can then build something better.

14:18Carol Massar:Yeah, agreed. Like, I just think about growing up and, like, the local shopkeepers and just we all were kind of running in each other or a religious organization and meant all different types of people. I know we've got a question. Yeah, this is actually a perfect question for a segue that we wanted to get to and has to do with technology and your view of technology. We opened this conversation up to our viewers and listeners. Fantastic. We got a great question from Colin joining us from Atlanta. Colin writes in, could digital connectivity allow a more direct democracy? Would moving slightly away from representative democracy and to direct democracy help alleviate concerns from those who are losing faith?

14:57So two different questions there. I wanted to start with the technology one because you have some really interesting views about technology's role in actually moving us away from liberal democracy. What do you think? Well, I mean, let me just say that technology plays a central role in the book in several parts. but centrally in understanding how we transition from an industrial economy to a post-industrial economy. So the Google McDonald's is just a symptom of something much broader about how the economy is organized. And that was a technological transition. Partly globalization played a role as well.

15:30But second, algorithms are so much more important today. They, in some domains, actually rule our lives. So we have to come to grips with the information ecosystem, communication ecosystem created by algorithms. Now, in both how digital technologies influence shared prosperity and how algorithms influence our communication, I don't think there is anything predetermined. Technology doesn't come with a pre-programmed thing that says, I'm going to create inequality, I'm going to destroy communication. it's how we use technology how we define technology how we develop it and on social media i think it's very telling to go back to how people were viewing it in the late 1990s early 2000s everybody thought i mean almost everybody thought that this was going to democratize communication arab spring the arab spring was facebook and twitter in some places remarkable The new wikis were going to make information available.

16:36And, you know, those hopes, okay, they turned out to be not right. We can agree on that. But they weren't completely naive. The reason why they weren't naive is because technology had that capability. We could have built new communities for reliable information, to create new compromises, to find new bridging ways in which we can bring ourselves together. But it turned out that the key decisions that many companies made were not about that. MySpace, for example, one of the first social media sites, is a bit closer to that because it brought communities together. Shout out to Tom at MySpace. Okay, fantastic, yes.

17:15But algorithmic feeds that essentially amplified the most incendiary material, the one that gets views because it's extreme, that angers the other side and motivates your side to become even more vocal. Those are the kinds of things that rise up in the algorithmic feed. And on another part, they are the things that create envy and undergird mental health problems. But all of them, you know what they also do? They take their attention towards social media communication. And as a result, Americans interact much less physically with other people. They have fewer friends, fewer close friends. They spend much less time going to bars, coffee shops.

17:56Nobody calls anybody anymore. Nobody calls anybody anymore. That's pretty amazing. And that is very important because the social networks that we form are messy. They teach us to make compromises. And they give us a lot of rich contextual information about our lives.

18:10Carol Massar:Do you blame the tech CEOs who run those companies? Oh, we might as well. Why not? Well, because it is an interesting time where you are seeing lawsuits against social media companies, meta platforms. We keep referencing this in their latest earnings. I think it was$2 billion for certain lawsuits. and they said it was a material impact on the company. And it's just the beginning of lawsuits from our reporting team. But I do wonder, what is their responsibility? And this goes to, you get into this too, like the people who run these firms, and they're very wealthy and very influential. And I don't think I'm speaking out of turn.

18:48Carol Massar:And we talk about having a seat at the table, the political table. We don't. It's people with their deeper pockets. Well, you are very influential, Carol, and Tim. Thank you. We do have microphones. Actually, you are very influential. But anyway, so, but like all of this. Of course, we all have responsibility. We all have responsibility. And you know what? Let's take one step back. If democracy is in crisis, we are all responsible because democracy requires active, vigilant, participating citizens. Why aren't people more active? I think we took some of these things for granted. Okay. We've gone down the path of sort of easy sort of life, and some of what democratic citizenship requires is messy.

19:44Some of the things that we should do in our communities are costly. Like, for example, giving blood. You know, you get very little benefit from that other than the pride that you're contributing to something. And people used to do that much more, and they do that much less. That's just a symbolic thing that shows that if you don't create the right narrative, the right sort of way of drawing on our responsibilities, people are going to start withdrawing a little bit, and then a little bit more, and then a little bit more, and then the result is we're not participating in communities, and we're not participating to defend democracy.

20:19But I can't help but think of the changing view that Americans have about democracy in recent years. And I think back to the Democratic National Convention in 2024 and the core message from Democrats. And it was I'll never forget this. I was watching this on TV. I watched the Republican one as well. But they played this video that was basically a highlight reel of January 6th. And it was, you know, Carol and I were on air covering January 6th when it happened. We were speaking to our colleagues who were at the Capitol who were, you know, felt under attack. And I remember watching that and thinking, wow, you know, there's no way that Trump is going to win this election because Americans are being reminded of this.

21:10Right.

21:11Carol Massar:Right. Right. But it's like January 6th never happened to so many people, including lawmakers who stand side by side with the president. And at one point were very critical of him. And I'm just curious, is like, does that stuff not matter in today's age? Or does that really matter to show that there are people who somehow feel like, I don't have representation. I'm looking for another way. I don't know if that's part of. Well, I mean, I think, look, it also gets to the core and we'll talk about economics. But it's like, obviously, it was what voters felt like, you know, they were driven by economic issues at the polls, not democracy issues.

21:53I think they were driven by, motivated by economic issues. And they were also reacting to Biden's presidency that they thought in some ways didn't work very well. And I think part of the reason why January 6th was not front and center is cognitive dissonance. Once they said they were going to vote for the Republican alternative because we want to vote against the establishment. And right now the establishment is Biden. And the left, you know, is always more at the center of liberal democracy because it was, you know, things like the New Deal liberalism or the social democracy in Europe that led the charge.

22:31So it's more associated with establishment. So anti-establishment feeling turns against that. And then cognitive dissonance. I don't want to hold two conflicting thoughts in my mind. I'm going to support Trump. Well, then I'll downplay January 6th. But the media ecosystem played a very important role.

22:50Carol Massar:If the media ecosystem was integrated and the communities were integrated, that would be much harder. Because your brother, you wouldn't be fighting with your brother. And he would remind you, look, don't you forget January 6th. But today, either in your community there is nobody who has an opposite view to yours. Or if they do, the situation has become so polarized that you don't listen to them because you think of them as the enemy. even when they are your brother. And that's really not very productive. But that's, again, an ecosystem that we've created. We don't need to be in that ecosystem.

23:25Do you think, and we're going to take a break

23:28Carol Massar:and then come back and talk some more, in terms of social media companies, technology companies, there needs to be some kind of greater regulation over them in terms of these platforms because they are so influential? Yes, absolutely. So let's take a step back. And democracy needs citizenry, as we discussed. But that needs to be informed citizenry. So information, relevant for politics, on some level is a public good. And if it becomes very polluted, it makes things very difficult. So imagine that a mayor takes important steps and shows how you can rebuild your community, provide better public services, improve things.

24:14You mean the job of a mayor? For example. But then social media presents that as a complete failure to everybody. That's going to create real difficulties. Now, but it's a very delicate issue. Liberalism, as I said, has to stand for freedoms, and freedom of speech is critical. And I'm an absolutist.